Environmental conditions can have a major impact on developmental progression in animals. For example, when C. elegans larvae encounter harsh conditions they can reversibly halt the passage of developmental time by forming a long-lived dauer larva at the end of the second larval stage. Here, we show that the period homolog lin-42, known to control developmental time, also acts as a component of a switch that mediates dauer entry. Loss of lin-42 function renders animals hypersensitive to dauer formation under stressful conditions, whereas misexpression of lin-42 in the pre-dauer stage inhibits dauer formation, indicating that lin-42 acts as a negative regulator of this life history decision. These phenotypes place LIN-42 in opposition to the ligand-free form of the nuclear receptor DAF-12, which indirectly senses environmental conditions and helps to integrate external cues into developmental decisions. Mutations that impair DAF-12 ligand binding are exquisitely sensitive to the absence of lin-42, whereas overexpression of LIN-42 can suppress the dauer constitutive phenotype of a ligand-insensitive daf-12 mutant, suggesting that LIN-42 and DAF-12 are intimate partners in controlling the decision to become a dauer larva. The functional outputs of Period family proteins and nuclear receptors also converge in other organisms, suggesting that the relationship between lin-42 and daf-12 represents an ancient genetic framework for responding to environmental stimuli.